Grain markets this spring feel a bit like they did in 1996 – euphoric.
Back then, concerns about corn and wheat were driving the market. This year, it’s corn and soybeans.
In 1996, drought in the U.S. winter wheat belt and water-logged fields in the Midwest and the eastern Canadian Prairies attracted attention.
This year, bad weather has slashed soybean yields in South America and dry fields are a worry in the western U.S. winter wheat area and the western Prairies.
After a poor harvest in 1995, U.S. corn and wheat stocks in the spring of 1996 were scraping the bottom of the barrel. This year, soybean stocks are being rationed and there’s concern about U.S. corn stocks.
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In early April 1996, the May Chicago corn futures price was $4.36 US per bushel, soybeans were $7.81 and wheat was $5.25. The Winnipeg June canola contract was $446 Cdn per tonne and the May barley contract was $183.60.
As of April 5 this year, the May Chicago corn futures price was $3.30 US per bushel, soybeans were $10.25 and wheat was $4.14.
The Winnipeg June canola contract was $432.80 Cdn per tonne and May barley was $161.50.
There is no way to know where grain prices will end up this year. The following are the bullish and bearish factors at play in the market to consider.
Bearish: American farmers in 1996 were worried about corn and soybean seeding conditions. This year, corn and soybean producers appear happy with soil moisture and weather heading into seeding.
Bearish: European producers are going into spring with expectations of a good crop.
Bullish and bearish: Eight years ago, South America was a modest factor in oilseed prices. Today Brazil and Argentina are production giants. Weather and disease problems have forced production forecasts down.
This supports soybean prices for the whole year.
But in the short term, Brazilian beans are starting to hit the market and that could trim prices from their recent highs.
Bullish: World stocks-to-use ratios for wheat and feed grains are much tighter today then they were in 1996.
Bullish: Corn that is used to produce ethanol in the U.S. is expected to increase 13 percent to 1.3 billion bushels in 2004-05, or about 12 percent of the total corn crop.
Bullish: Long range forecasts show the possibility of a hot dry summer in the corn belt.
